Site Neutrality Is Opening Community Medical Space. Non-Hospital-Affiliated Practices Need to Move Smart.

For two decades, hospital systems used a structural payment advantage to expand aggressively into community markets. They acquired physician practices, reclassified their locations as hospital outpatient departments, and collected a facility fee on top of the professional fee for every encounter. That premium funded the build-outs. It funded the acquisitions. And it put non-hospital-affiliated practices competing against institutions operating with a subsidy baked into their real estate model.

CMS's 2026 outpatient payment rule is pulling that subsidy back. The facility-fee premium is shrinking. And hospital systems are responding exactly the way you'd expect — consolidating back toward campus.

We're already watching it happen. In 2025, hospital systems began visibly slowing acquisitions of off-campus practices. The movement back toward campus accelerated. The space they're leaving behind is real — already built out for clinical use, in community locations where patients are accustomed to going for care. For non-hospital-affiliated practices, that's the most significant real estate opportunity in a decade.

But not every vacancy is what it looks like.

The trap inside the opportunity

Some of that community space was extended on the strength of the facility fee, not underlying patient demand. Strip the fee away and the volume follows the health system back to campus. What remains in the community isn't necessarily a viable patient base for a non-hospital-affiliated practice — it's a well-located empty suite that looks attractive on a per-square-foot basis.

Favorable rent on the wrong location is still the wrong location.

The practices that move into vacated hospital space based on availability and build-out condition will find out in year two why it was available. The ones who move based on actual procedure demand in that geography will be positioned to grow into a market the health system just handed them.

The difference between those two outcomes is data.

What you need to know before you sign

For any community location worth considering right now, three things need to be answered with actual market data before a letter of intent is signed.

Is the procedure demand real and unmet? Not population counts. Actual billing volume in your specific CPT codes within your draw area, measured against the providers currently capturing it. If patients in that geography are traveling more than 20 minutes for procedures you perform, that gap is yours to capture. If local providers are already meeting the demand, the vacancy is a vacancy for a reason.

How competitive is the procedure landscape at the code level? Specialty headcounts mislead. A market can look open by physician count and be saturated for the specific procedures your practice depends on. Code-level analysis shows where the real openings are.

Are the referral relationships accessible? For specialties that run on referrals, the question isn't just whether referring providers are nearby. It's whether they're accessible or locked into a competing system that controls where referrals go. That's knowable before you commit to a location.

The practices that will win this window

Non-hospital-affiliated practices can operate in community markets at cost structures hospital systems cannot match. Without system overhead, without facility-fee dependency, a well-run group can sustain a community location on patient revenue alone. That's a structural advantage — but only if the location is well-chosen.

The space coming open right now will get claimed. Some of it represents genuine opportunity. Some of it represents a health system quietly exiting a market that couldn't support the volume without the facility fee propping it up.

Twenty-five years of representing physicians has shown us the same mistake made repeatedly — a location decision that looked right on the surface, made without the market intelligence to know what the surface was hiding.

The data to make that call exists. The billing record of every encounter in that market shows what's being treated, where demand is going unserved, and who is already positioned to capture it.

Use it before you sign.

Author

David Rutson

Founder & Principal Advisor • Globe Medical Realty Advisors

Represented independent physicians and non-hospital-owned groups exclusively for over 25 years across 48 states.